Fifteen institutional investors, mostly commercial banks, joined the first auction of the bill, worth Bt5 billion.

A BOT source said the three-day bill was the shortest maturity bill since the central bank was founded.

The lowest yield offered by the bidders was 4.88 per cent per annum, while the highest was 5 per cent. The average yield was 4.974 per cent.

The source said the average yield was close to the market-yield curve, lying between the yields of the Finance Ministry's one- and seven-day treasury bills. Those investors offering the lowest yield will be distributed the bills first, followed by those who offered higher yields. "The demand for the bond auctions is always high, more or less depending on the liquidity of each bank. However, the average yield bid today is normal," said the source. The winning bidders are required to pay next Monday and will receive the interest next Thursday.

The three-day bill is the first step in the central bank's plan to issue short-term bills with maturity of one to 15 days. This is aimed at facilitating the central bank's short-term liquidity management in the market. Prior to the issuance of the three-day bill, the shortest maturity of BOT-issued bonds was one and two years.

The source said the bonds would introduce a greater variety of monetary tools for increasing liquidity in the market. The short-term bills will support the central bank in stabilising the money market more efficiently. For example, juristic persons can prepare a fund to pay taxes by letting it sit in a bank. When the banks have large deposits, they are likely to decrease interest rates. Therefore, this type of bill is created to help maintain liquidity and interest rates in the market.

"Large liquidity would suddenly push down interest rates. So, this is part of our effort to stabilise the market," the source said.

Anoma Srisukkasem

The Nation